Businesses have time to comply with health care reform, but some local firms are already grappling with challenges of providing coverage

A delay from President Barack Obama means businesses can wait until 2015 to provide the required health insurance to some employees under the Affordable Care Act. But that hasn’t stopped employers large and small from continuing to try to interpret the 10,000-plus-page law.

It just gave them a little bit more time to learn about one of its key parts, called the employer mandate.

“The pedal to the metal is no longer the case,” said Seth Stein, president of San Diego-based Eastridge Group of staffing companies. “We gently have our foots on the brake because the employer mandate was pushed back.”

Specifically, the employer mandate is the requirement that businesses with more than 50 employees provide health insurance benefits for people who work more than 30 hours per week.

But there’s a lot more to the law.

To name a few adjustments, the mandate requires health care be affordable, meaning it makes up no more than 9.5 percent of household income; it defines non-tax-deductible penalties for not providing health insurance; and it eliminates capped health-insurance programs that won’t pay over a certain amount. Still, various questions remain from employers, large and small.

“I don’t think you’re going to ever find one individual who has a grasp on every aspect of it,” said Mark Kimsey, a co-founder of Mission Healthcare, a Mission-Valley based home-health care provider with 473 employees.

Employers have reacted differently to the law, depending on their business model. Some have cut hours for part-time workers to avoid the mandate, while others say it won’t affect them because they already provide insurance.

Lewis Michaelson, chief operating officer of Katz and Associates, a La Jolla-area consulting firm of 45 employees, said not much would change because the company already offers benefits. The company’s product is the expertise of its employees, so it’s important to invest in their health. Michaelson said Katz and Associates plans to add about eight full-time positions in the next year.

“We’re not anticipating hiring more people on a part-time capacity to avoid providing health insurance,” he said. “Our employees are way too important to us to do that.”

Michaelson said one particular challenge is finding out the household income of its workers. An employer knows how much it pays each worker, but not what their spouse makes. That makes it more difficult to know how to price health insurance, because it can’t exceed 9.5 percent of household income, which is how the law defines affordable.

“It’s relatively easy where the younger workers are concerned,” Michaelson said. “It’s going to be the older workers. As they climb into higher and higher age bands of rates for their coverage, there may need to be some adjustments in the type of coverage that’s made available.”

Cutting workers

For some employers, it’s easier to just cut hours.

Trader Joe’s, the closely held grocery store chain, will end health benefits for part-time workers next year, directing them instead to new insurance marketplaces created by the Affordable Care Act. Employees with fewer than 30 hours a week will no longer be given health coverage as of Jan. 1, and instead will get a $500 payment to help them buy insurance elsewhere, the Monrovia-based company said this month.

Smashburger San Diego franchise partner David Whisenhunt said his approach to the new federal health care regulations will depend on whether he qualifies as a small or a large business.

“I was talking to our insurance broker about how to figure that out, and it’s not an easy calculation,” he said.

He welcomes the one-year reprieve on the penalties that will be assessed to businesses that don’t comply. After all, he said, if the government needs more time to figure out how to implement the reforms, then business owners need more time to figure out how to comply with them.

If he qualifies as a large business, Whisenhunt is torn about what to do.

Although he offers health insurance to his managers and other full-time employees, he said he may have to consider cutting them down to part-time hours to avoid the potentially higher costs of the new plans. It’s not his ideal scenario.

“Quite frankly, if I do that, they’re going to have to get second jobs, most of them, and that’s not fair to them,” Whisenhunt said. “But I’ve got to do what’s right for the business, so I may have to do that.”

Part-time workers have their own additional costs, he said. They come and go, and he has to spend a lot of money training them, “but it would still be cheaper than the health care costs.”

Still, he said, choosing to ignore the mandate and pay the penalties is a bad tactic.

“It’s just a matter of figuring out how to work within the system.”

Staffing agencies’ issues

But it’s especially a challenge for staffing agencies, given high turnover, to figure out how to provide health insurance under the act.

Stein, the Eastridge president, said the government views temp agencies like any other employer, but he’s not sure yet what private insurers would be willing to offer them due to the fluid nature of the work and because of a fear that only those who need the coverage would opt-in.

“That’s a huge unknown,” he said. “Right now, the known is that paying the penalty or the tax and offering any assistance to help them or interested employees get to the exchange is obviously a much more clear path.”

Currently, Eastridge offers a mini-med plan that is capped on the benefits it will pay. Employees can sign up for the coverage after receiving their first paycheck. However, capped plans will no longer be legal under the Affordable Care Act. Stein said he’s still unclear when someone would need to be insured under the mandate, whether after three days, 60 days or 90 days. It’s one of many questions his team is trying to figure out.

“Right now that’s why we’re in a holding pattern,” said Stein, estimating his company has spent 400 hours researching the law, including attending seminars and workshops.

At Mission Healthcare, Kimsey said the company is more concerned about reduced Medicare reimbursements squeezing already tight margins of about 10 percent. The organization, which provides medical, nonmedical and hospice care, offers benefits to employees who work more than 32 hours per week. Kimsey said about 20 of its 473 employees work between 30 and 32 hours per week. He said when the mandate kicks in, Mission Health would make them benefit-eligible.

“The most likely fallout in the short term is going to be a reduction in wages,” he said. “We run very low margins. You do not get rich in this industry. You’ve got to squeeze it from somewhere.”